Pakistan has received combined economic and financial targets for the seventh and eighth reviews of its International Monetary Fund bailout programme, Finance Minister Miftah Ismail said on Tuesday.
“Early this morning, the Government of Pakistan has received an MEFP from the IMF for combined 7th and 8th reviews,” Ismail tweeted.
An MEFP (Memorandum of Economic and Financial Policies) contains certain prior actions that would be necessary for implementation before the IMF board takes up Pakistan’s case for approval and the subsequent disbursement of about $1bn next month.
IMF and Pakistan, in a breakthrough on June 22, reached an understanding on the federal budget for 2022-23, increasing the likelihood of reviving the extended fund facility (EFF) after authorities committed to generate Rs436 billion more taxes and increase petroleum levy gradually up to Rs50 per litre.
The understanding was reached during a meeting, held via video link, between the IMF staff mission and the Pakistani economic team, led by Ismail.
The IMF is now expected to issue a statement confirming substantial progress on the fiscal framework, the two sides agreed. Top government sources said that to win over the IMF mission, the Pakistani side had agreed to start charging on all POL products a petroleum development levy which will be gradually increased by Rs5 per month to reach a maximum of Rs50.
Last week, when news of the understanding was reported, PTI leader and former finance minister Shaukat Tarin said the deal with the IMF was still weeks away as the government had yet to receive an MEFP.
“Their (IMF’s) statement says that this is a work in progress and there has been some headway […] they are saying they will give the memorandum of economic and financial policy (MEFP) on Friday. When that has not been received, how can it be said that an agreement has been reached?”
Tarin had said that the MEFP would be an extensive and detailed document, which would be deliberated upon and discussed “line by line”. Then a technical agreement is signed which goes to the IMF’s board in Washington, he said, predicting that the deal would materialise by July-end.
In yet another retreat, the government also agreed to impose 1pc poverty tax on people earning Rs150 million, 2pc on those earning Rs200m, 3pc on over Rs250m and 4pc on Rs300m and above. In the original budget, the government had set a 2pc poverty tax only on those earning Rs300m and above.
The government also agreed to do away with provisions for additional salaries and pensions, for which Rs200bn had been set aside as block allocation. Instead, a separate allocation of contingencies had been made but that would be strictly meant for emergencies like floods and earthquakes so that amount remains unspent.
Pakistan also committed to deliver a Rs152bn primary budget surplus, which means the revenues would finance all expenditures — in addition to interest payments — and still leave Rs152bn surplus in the national kitty.
Last week, the government also imposed a “super tax” on large-scale industries including cement, steel, sugar, oil and gas, fertilisers, LNG terminals, textile, banking, automobile, cigarettes, beverages, chemicals and airlines.